Mike Ockenden (Director General) gives expert video advice on: As a buyer what does a HIP mean to me?; As a seller what does a HIP mean to me?; What are the benefits of the home information pack? and more...
What is a Home Information Pack (HIP)?
A Home Information Pack is the bringing together a number of documents about a house which would be available for the seller before they put the house on the market. As a result, the buyers will be much better informed about for what they make an offer.
Why do I need a HIP?
You need a Home Information Packet because the government says you need one. There are very good reasons behind it, but effectively from the first of the year, if you're selling a four bedroom home, you have to have a HIP. Some time between now and the rest of the year, you also need a pack for three bedroom houses and the rest.
How much will a HIP cost me?
When you ask how much a HIP will cost, it's probably not a single figure that can be quoted because packs will be different up and down the country and according to the size of the property and so forth. If I was giving you a guideline, for an average three bedroom family home in Middle England, if I can call it that, a HIP would cost about £300 plus VAT.
When was this legislation brought in?
The legislation behind Home Information Packs was embodied in the Housing Act, which was passed in November 2004. Since then, there have been various regulations which have been passed, and you may have seen some of the controversy around those, but the final set of regulations which we're working to now was passed on the 14th June 2007.
Why was this legislation brought in?
We have a broken process of buying and selling homes, in short, in England and Wales. Roughly one in four transactions will fail between acceptance of an offer and the exchange of contracts, before the sale or purchase goes through. On average, it takes nearly six months for a transaction in the present system for people to buy and sell homes. It's an extremely stressful time because of that. Because of the waste in transactions, we consumers pay about £1 million a day in costs, which are totally redundant.
What is in a HIP?
A Home Information Pack contains a number of documents. First of all, there is an index to say what's in it. Secondly, there is an Energy Performance Certificate, and that will come straight after the index, and that tells you about the energy efficiency rating of your house, how much carbon it uses, and so forth. You'll then have a search of the Land Registry, which effectively tells you that the person who's selling the house owns it, where the boundaries are, and so forth. In a HIP you'll also have Local Authority searches, and those are searches around things like Planning Permissions, and whether there's going to be a road put through your back yard, or whether there's any particular information you should know that may impair the value of the house. Those are the documents you have to have in a Home Information Pack. There are other documents you can have, which are what they call authorised; they're voluntary. Those are things like a Home Condition Report, which is a bit like a survey on your house before you sell it, and other searches. One which would be very topical in recent times is flood information, for example. You might want to put in warranties and guarantees that you have on work you've had done in the house, maybe to do with dry-rot, or installing double-glazing - those sorts of issues. There are a number of documents you must have, and other documents you can include, as well, in a Home Information Pack.
What will a HIP provide?
If we look at the core, what a HIP provides is an extensive amount of information to buyers before they make an offer. If you think about the way the system works at the present time, somebody puts the house on the market, we see the details perhaps on the internet first, and get further information from an estate agent and go around to take a look. We'll often be taken in very quickly as to whether we like the property or not and maybe make an offer on it, but know absolutely nothing about any problems or issues there may be, which may affect our buying decision. We may just decide to pull out or change the level of the offer that we may make. What Home Information Packs do is they put a lot more information in your hands right at the beginning, so you don't waste your time and waste the seller's time, and are much more likely to come to an agreed value that's going to stick throughout the course of the transaction.
As a buyer what does a HIP mean to me?
As a buyer, what a HIP means to you is confidence in knowing beforehand what you pay for. The way I put it is this: we often buy houses with our hearts, up front. The first thing we do is we see a property; in my case it's my wife who sees a property, and she falls in love with it and then we go through the process of getting all the information, which is the stuff that the head needs in order for the transaction to go through. If you got the Home Information Pack at the beginning of the transaction then you can kick in the head at the same time as the heart and make a more balanced offer on a property.
As a seller what does a HIP mean to me?
First of all, think of people who are sellers as also being buyers, and 87% of the time they are. A seller will actually see the logic of a HIP because they will have them when they are looking at them as a buyer. For a seller, what's the HIP doing? It's reducing the chances of the transaction falling through. That's just as stressful on the sales side of the transaction as it is on the purchase. We buy and sell in trades in this country, and so the greater chance of the transaction failing, the greater the stress value, the more of a chance there is for us to raise cost. Bringing that down is a real issue. Perhaps we can also improve the speed of a transaction, so that zone of uncertainty before you get to the exchange of contracts is reduced. The HIP reduces stress, and that's got to be good for all of us.
Will a HIP replace a surveyors report?
A HIP doesn't replace a surveyor's report. Up until the 18th July last year, one of the documents you had to have in a pack was a Home Condition Report. A Home Condition Report is like a survey, a very objective survey, produced by a home inspector, and that Home Condition Report could be relied on by a seller, a buyer and the mortgage lender. Where a seller opts to have a Home Condition Report in the Home Information Pack, then absolutely it replaces a survey. By way of informing a buyer as to the condition of the property, that should serve to move transactions through much more quickly. We believe that there should be a Home Condition Report in every HIP and our association will be lobbying the government once packs go live to get it back in a mandatory document. It would serve to reduce transaction failure even more.
What are the benefits of the home information pack?
The benefits of the Home Information Pack in summary are quiet straight forward. Fewer transactions fall through, transaction speed is improved, we waste less money and stress levels are reduced.